Coronavirus Pandemic Encourages Croatian Cities to Cut Surtax

Coronavirus Pandemic Encourages Croatian Cities to Cut Surtax

As Jadranka Dozan/Poslovni Dnevnik writes on the 9th of June, 2020, as a source of revenue for local budgets, surtaxes are more important for larger cities, so they're harder to give up for some. However, the coronavirus pandemic has caused several to think again...

Valpovo and Motovun will both abolish the surtax on income tax at the end of this month. The aforementioned locations thus join a small number of local units in Croatia whose residents don't have the burden of surtax on their backs, as well as everything else they need to think about in these coronavirus-dominated times.

Pozega and Belisce both reduced their surtax on income tax from 10 to 7 percent back in early June, and a month earlier (in early May) the municipality of Donji Miholjac started applying a 5 percent surtax instead of the previous 8 percent surtax. At the same time, in Bjelovar, an extremely forward-thinking continental Croatian city that has made the biggest strides in the area of ​​local levies in the past few years, a zero surtax rate has been in place since May.

Bjelovar's city authorities, led by Mayor Dario Hrebak, reduced the surtax from 12 percent down to 9 percent last May, and after cutting it even further, down to 6 percent earlier this year, they have abolished it completely since last month. Starting on May the 1st, 2020, the municipality of Dugopolje also decided to abolish surtax, surtax there stood at 8 percent until that point in time.

A month ago, the local government in Rugvica decided to make a similar move, where the surtax rate within income taxation was 6 percent until relatively recently. Sinj then completely exempted its citizens from surtax at the rate of 8 percent.

According to the Tax Administration, the same was done by the Belica (Medjimurje), which, until this year, charged a symbolic 1 percent surtax. Promina in the Drnis region (inland Dalmatia), has had its 5 percent surtax abolished since back in February.

These are just a few of the areas of Croatia in which local governments have decided to take the pluge and redice the fiscal burdens on their citizens in the coronavirus era, there are others which could be added to this list and it's likely that more will follow.

This is, at least to some extent, a question of the structure of the economy and of employees, ie, the average level of wages and the share of those who are outside of the tax man's scissors. For the authorities in smaller cities, the policy of the abolition of surtax can also be an instrument for attracting the population and entrepreneurial activity.

Thus, Dario Hrebak of Bjelovar recently said that there should be no fear that reducing taxes will cause a loss in revenue. Back in March, the first month of the coronavirus crisis, they earned half a million kuna more than in the same month last year. Increasing consumption and getting rid of surtax creates, he says, yet another new activity.

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